US Construction Spending, Labor and Materials Outlook American Wire - - PowerPoint PPT Presentation

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US Construction Spending, Labor and Materials Outlook American Wire - - PowerPoint PPT Presentation

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US Construction Spending, Labor and Materials Outlook American Wire Producers Association Atlanta, May 10, 2017 Ken Simonson Chief Economist, AGC of America 2 Construction spending & employment, 2006-2017 Total spending, Feb. 06

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SLIDE 1

US Construction Spending, Labor and Materials Outlook

American Wire Producers Association Atlanta, May 10, 2017 Ken Simonson Chief Economist, AGC of America

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SLIDE 2

Construction spending & employment, 2006-2017

$0 $250 $500 $750 $1,000 $1,250 2006 2008 2010 2012 2014 2016 1,500 3,000 4,500 6,000 7,500 9,000 2006 2008 2010 2012 2014 2016

2

Total spending, Feb. ‘06 (peak)-Mar. ‘17

billion $, seasonally adjusted annual rate (SAAR)

Total employment, Apr. ’06 (peak)-Mar. ‘17

thousands, seasonally adjusted

$1.21 trillion $1.22 trillion (1% above last peak) 7.7 million 6.9 million Private Residential Total Public Private nonresidential Nonresidential (6% below peak) Residential (17% below peak) Total (11% below peak)

March 2016-March 2017: total 4% private res. 7%, private nonres. 6%, public -6% March 2016-March 2017: total 2.5% residential 4.3%, nonresidential 1.4%

Source: Spending--U.S. Census Bureau; Employment--Bureau of Labor Statistics

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SLIDE 3

7 areas of policy uncertainties affecting construction

  • Infrastructure: How much? How soon? What types? Funding source?
  • Immigration: Impact on new & current workers? Wall construction?
  • Trade: Higher materials costs? Shortages? Less or more factory const.?
  • Regulatory relief: Which ones? How soon?
  • Health care rewrite: Timing? Impact on demand for hospital const.?
  • Fiscal: Lower taxes? For whom? Bigger deficits? Implications for

construction demand, labor supply?

  • Monetary: Higher interest rates? Impact on housing, state/local bonds?

Source: Author 3

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SLIDE 4

2016 vs. 2015 Jan.-Mar. ’17 vs. ’16 2017 forecast

Nonresidential total (public+private) 5 % 5% 2-6% Power (incl. oil & gas field structures, pipelines) 4 5 5-10 Highway and street 1

  • 5

2-5 Educational 6 5 3-7 Manufacturing

  • 4
  • 10

<0 Commercial (retail, warehouse, farm) 11 14 0-5 Office 25 21 8-13 Transportation

  • 6
  • 9

0-5 Health care 2 1 0-5 Lodging 25 13 ~0 Sewage & waste disposal

  • 9
  • 24

Other--amusement; communication; religious; public safety; conservation; water: 10% of total

  • 1
  • 1

Nonresidential segments: 2015-16 change, 2017 forecast

Source: U.S. Census Bureau construction spending report; Author’s forecast 4

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SLIDE 5

'14 '15 '16 '17

Oil & Gas

Power (94% private)

$0 $30 $60 $90 $120 '08 '10 '12 $0 $10 $20 $30 $40 $50 '08 '10 '12 '14 '15 '16 '17

Construction spending: industrial, heavy

annual total, 2008-13; monthly, SAAR, 1/14-3/17; billion $

$0 $25 $50 $75 $100 '08 '10 '12 '14 '15 '16 '17

  • Mar. '16-Mar. '17 change: 5% (oil & gas -10%; electric 9%)

Electric

Manufacturing (99% private)

  • Mar. '16-Mar. '17 change: -10% (chemical 4%; other -21%)

Other Chemical

Communication (99.5% private)

  • Mar. '16-Mar. '17 change: 18%

Source: U.S. Census Bureau construction spending report

'14 '15 '16 '17 $0 $10 $20 $30 '08 '10 '12

Amusement & recreation (54% private)

  • Mar. '16-Mar. '17 change: 9% (private 12%; public 6%)

Public Private

5

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SLIDE 6

Key points: power, manufacturing, recreation

  • Solar, wind power are growing again; expect more gas-fired plants,

natural gas pipelines into ‘18

  • Mfg decline led by completion or delay of chemical plants (fertilizer,

ethane crackers, petrochemicals, LNG) and transportation equipment (cars, trucks, jets, railcars); recovery in ‘18 depends on policy impacts, especially trade and tax

  • Amusement & recreation spending is very “lumpy”—a few big

stadiums at irregular intervals; but funding for local, state, federal parks keeps eroding

Source: Author 6

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SLIDE 7

'14 '15 '16 '17 $0 $30 $60 $90 $120 '08 '10 '12 $0 $10 $20 $30 '08 '10 '12 '14 '15 '16 '17

Construction spending: public works

annual total, 2008-13; monthly, SAAR, 1/14-3/17; billion $

$0 $10 $20 $30 '08 '10 '12 '14 '15 '16 '17

Highways (99.6% public in 2016)

  • Mar. '16-Mar. '17 change: -2%

Sewage/waste (99% public)

  • Mar. '16-Mar. '17 change: -22%

Water supply (99% public)

  • Mar. '16-Mar. '17 change: -14%

Source: U.S. Census Bureau construction spending report

$0 $10 $20 $30 $40 $50 '08 '10 '12 '14 '15 '16 '17

Transportation facilities (71% public)

  • Mar. '16-Mar. '17 change: -12% (private -9%; public -14%)

public private 7

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SLIDE 8

Key points: roads, transportation, sewer/water

  • Highway funds benefit from more travel, hence fuel purchases;

gradual pick-up in state funding & P3s; higher federal funding unlikely before ‘18

  • Railroads slashing investment; pickup in airport projects but no

increase likely in port, transit construction funding

  • Eastern & Midwestern cities under orders to make long-term

upgrades to sewer systems that should keep a floor on spending; water utilities hurt by drought, conservation but may get money for lead abatement

Source: Author 8

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SLIDE 9

$0 $25 $50 $75 $100 '08 '10 '12 $0 $10 $20 $30 $40 $50 '08 '10 '12 '14 '15 '16 '17

Construction spending: education, health care

annual total, 2008-13; monthly, SAAR, 1/14-3/17; billion $

'14 '15 '16 '17

Education: state/local K-12, S/L higher; private

  • Mar. '16-Mar. '17 change: 1% (state/local preK-12 3%;

state/local higher ed -10%; private 15%)

S/L preK-12 Private S/L higher ed

Health care: (private hospital, S/L hospital, other)

  • Mar. '16-Mar. '17 change: -1% (private hospital 3%; S/L

hospital -21%; other: special care, med. office, federal -7%)

S/L hospital Private

hospital Source: U.S. Census Bureau construction spending report

Total (77% public) Total (80% private) Other

9

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SLIDE 10

Key points: education & health care

  • Bond issues passed in 2014-16 should boost preK-12 projects in

2017 and 2018

  • Higher-ed enrollment declined 21% from 2011 to 2016, so colleges

need fewer dorms & classrooms; apts. (multifamily) replacing dorms (educational construction)

  • Hospitals face uncertainty about utilization and reimbursement rates

if Affordable Care Act is repealed/modified/replaced; also, more competition from standalone urgent care, outpatient surgery, clinics in stores

Source: Author 10

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SLIDE 11

'14 '15 '16 '17 $0 $20 $40 $60 $80 '08 '10 '12

Construction spending: developer-financed

annual total, 2008-13; monthly, SAAR, 1/14-3/17; billion $

$0 $20 $40 $60 $80 '08 '10 '12 '14 '15 '16 '17 $0 $10 $20 $30 $40 '08 '10 '12 '14 '15 '16 '17

Retail (private)

  • Mar. '16-Mar. '17 change: 5%

Office (90% private in 2016)

  • Mar. '16-Mar. '17 change: 16% (private 18%; public 1%)

Public Private

Total

Warehouse (private)

  • Mar. '16-Mar. '17 change: 36%

Lodging (private)

Source: U.S. Census Bureau construction spending report

$0 $10 $20 $30 $40 '08 '10 '12 '14 '15 '16 '17

  • Mar. '16-Mar. '17 change: 9%

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Key points: retail, warehouse, office, hotel, data centers

  • Retail now tied to mixed-use buildings & renovations, not standalone

stores or shopping centers

  • Warehouse market still benefiting from e-commerce; more local than

huge regional distribution centers likely in future

  • Record employment each month but office space per employee keeps

shrinking; more urban & renovation work than suburban office parks

  • Hotel construction likely to drop as revenue per available room slows
  • Data centers remain a strong niche but no data available on how strong

Source: Author 12

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SLIDE 13

Population change by state, July 2015-July 2016 (U.S.: 0.70%)

AK 0.6% 1.8% 1.7% 0.7% 1.8% 1.0%

  • 0.2%

2.0% 1.7% 1.7% 0.03% 0.1% 0.9% 0.7% 0.02% 0.4% 1.6% 0.7% 0.4% 0.3% 0.3% 0.2%

  • 0.3%

0.1% 0.3% 0.3%

  • 0.02% 0.2%

0.1%

  • 0.01%
  • 0.1%

0.5% 1.1% 1.1% 1.8% 0.2 %

  • 0.5%

0.3% 2.0%

HI 0.2%

1.4% VT

  • 0.2%

CT

  • 0.2%

RI 0.1% DE 0.8% NJ 0.2% MD 0.4% DC 1.6% NH 0.4% decrease 0-0.49% 0.5-0.99% 1.0-1.49% MA 0.4% 1.5%+ Source: U.S. Census Bureau 0.9% 13

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SLIDE 14

CT

  • 3%
  • 7%

7% 9% 6% 7% 7%

  • 3%

8% 2% 2% 4% 3% 5% 2% 1% 3% 3% 5%

  • 2%

1% 5% 0.4%

  • 2%

7% 3% 4%

  • 10%

0.1% 4% 2% 3% 0.2% 7% 8% 8%

0%

  • 1%

5%

HI

  • 3%

3% VT 3% MD

  • 1%

DC

  • 9%

NH 6% Over -10%

  • 5.1% to -10%
  • 0.1% to -5%

0.1% to 5% MA 3%

State construction employment change (U.S.: 4%) 3/16 to 3/17: 39 states up, 10 + DC down

5.1% to 10% Over 10%

Shading based on unrounded numbers

0% Source: BLS state and regional employment report 7% NJ

  • 1%

DE 1% RI 8% 2% 14

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SLIDE 15

Metro construction employment change

3/16 to 3/17: 224 metros up (62%), 42 unchanged, 92 down (27%)

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Hardest positions to fill

28% 31% 50% 38%/33% 49% 50% 53% 60% 69% 0% 25% 50% 75% Engineers Estimators Project mgrs/supervisors Salaried field/office positions Concrete workers Plumbers, roofers Electricians Carpenters All hourly craft positions

% of respondents who are having trouble filling

Source: AGC Member Survey, August 2016 16

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SLIDE 17

21% 27% 43% 22% 20% 48%

Increasing contributions/benefits Providing incentives/bonuses Raising base pay

Hourly Salaried

How contractors are coping with worker shortages

0% 10% 20% 30% 40% 50%

Building information modeling (BIM) 7% Offsite prefabrication 13% Lean construction 15% Unions 18% Labor-saving equip., tools, mach. 21% Staffing company 24% Engage w/ career-building prog. 37% Subcontractors 39% Overtime hours 47% In-house training 48%

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0% 1% 2% 3% 4% 5% 6% 2001 2004 2007 2010 2013 2016

  • Avg. hourly earnings, 12-month % change, Feb. 2001-
  • Feb. 2017

100,000 200,000 300,000 400,000 500,000 600,000 2001 2004 2007 2010 2013 2016

Construction hires, Jan. 2001-Jan. 2017

Construction workforce indicators (not seasonally adjusted)

500,000 1,000,000 1,500,000 2,000,000 2,500,000 2001 2004 2007 2010 2013 2016

Unemployment, Jan. 2001-Jan. 2017

100,000 200,000 300,000 400,000 500,000 2001 2004 2007 2010 2013 2016

Job openings, Jan. 2001-Jan. 2017

Source: Bureau of Labor Statistics 18

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SLIDE 19

75 100 125 150 2011 2012 2013 2014 2015 2016 2017 75 100 125 150 2011 2012 2013 2014 2015 2016 2017 75 100 125 150 2011 2012 2013 2014 2015 2016 2017

Producer price indexes for key inputs, 1/11-3/17 (Jan. 2011=100)

Copper & brass mill shapes Aluminum mill shapes

Latest 1-mo. change: -3.1%, 12-mo.: 17% Latest 1-mo. change: 1.5%, 12-mo.: 9% Latest 1-mo. change: -1.0%, 12-mo.: 35%

Diesel fuel

75 100 125 150 2011 2012 2013 2014 2015 2016 2017

Steel pipe and tube

Latest 1-mo. change: 6.6%, 12-mo.: 15%

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SLIDE 20

75 100 125 150 2011 2012 2013 2014 2015 2016 2017 75 100 125 150 2011 2012 2013 2014 2015 2016 2017

Paving mixtures

Producer price indexes for key inputs, 1/11-3/17 (Jan. 2011=100)

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Concrete pipe

Latest 1-mo. change: -2.1%, 12-mo.: -2% Latest 1-mo. change: -0.4%, 12-mo.: 2%

75 100 125 150 175 2011 2012 2013 2014 2015 2016 2017

Latest 1-mo. change: -0.8%, 12-mo.: 8%

Gypsum products

75 100 125 150 2011 2012 2013 2014 2015 2016 2017

Flat glass

Latest 1-mo. change: 0.1%, 12-mo.: 2%

Source: Bureau of Labor Statistics

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SLIDE 21

2016 summary, 2017 forecast

Source: actuals: Census, BLS; forecasts: Author’s estimates

2016 actual Jan-Mar ‘17 vs. ‘16 2017 forecast

Total spending 5% 3% 2-7% Private – residential 6% 6% 6-10% – nonresidential 8% 7% 2-7% Public

  • 1%
  • 8%

0-3% Goods & services inputs PPI

  • 1%

3% 2-4% Employment cost index 1.9% 2.4% 3-4%

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AGC economic resources

(email simonsonk@agc.org)

  • The Data DIGest: weekly 1-page email (subscribe

at http://store.agc.org)

  • monthly press releases: spending; PPI; national,

state, metro employment

  • yearly employment & outlook surveys, state and

metro data, fact sheets: www.agc.org/learn/construction-data

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